Taken together, they paint a portrait of a cash-strapped consumer.<\/b>
\nSure, we still don\u2019t have jobs numbers, but there\u2019s a lot you can learn from a slop bowl.
A spate of fast food and fast casual restaurants reported earnings last week, including Cava and McDonald\u2019s, while Chipotle reported the last week of October.
Taken together, they paint a portrait of a cash-strapped consumer, particularly on the lower end of the earnings spectrum, as job growth weakens.
True to this, not new to this. McDonald\u2019s has often served as a harbinger of economic stress. And if comments from the company in the last year are any indication, low-income consumers continue to feel the pinch.
\u201cWe continue to see a bifurcated consumer base with [quick-service restaurant] traffic from lower-income consumers declining nearly double digits in the third quarter, a trend that\u2019s persisted for nearly two years,\u201d McDonald\u2019s CEO Chris Kempczinski said on the company\u2019s November 5 earnings call. \u201cIn contrast, QSR traffic growth among higher-income consumers remained strong, increasing nearly double digits in the quarter.\u201d<\/p>\n

That\u2019s the K-shaped economy you\u2019ve been hearing about. Kempczinski added that financial pressure on low-income consumers will likely continue into 2026.
\u201cRight now, you\u2019re seeing across the country, rents are at pretty high levels. You\u2019re seeing food prices, whether it\u2019s in restaurants or grocery, you\u2019re seeing food prices are high, you\u2019re seeing child care is high,\u201d he said. \u201cSo long as that consumer cohort is feeling like real incomes are under pressure, I wouldn\u2019t expect to see significant change there.\u201d
Of a certain age. Meanwhile, Chipotle and Cava both voiced concern about pullback from a key demographic for the two fast casual chains: the coveted mid-twenties to mid-thirties cohort.
\u201cThe 25-to-34-year-old demographic is a consumer that has experienced higher than average unemployment, also has been faced with student loan repayments,\u201d Cava CFO Tricia Tolivar told CFO Brew. \u201cBeginning in late spring, we started to see that consumer [demographic] spend a little bit less with us, certainly not reducing share, but just not as ebullient as it had been in prior years.\u201d
Similarly, Chipotle CEO Scott Boatwright noted on the company\u2019s October 29 earnings call that the same demographic \u201chas pulled back meaningfully.\u201d<\/p>\n

Notably, both Cava and Chipotle both said they gained market share, suggesting that the younger demographic isn\u2019t moving away from those restaurants, necessarily\u2014they\u2019re likely just cooking at home.
\u201cWe\u2019re not losing them to the competition, we\u2019re losing them to grocery [stores] and food at home,\u201d Boatwright said on the call. \u201cThat consumer is under pressure. It is one of our core consumer cohorts, and so they feel the pinch, we feel the pullback from them as well.\u201d
\u201cThere is definitely pressure out there for the consumer, and oftentimes restaurants are one of the first areas of the consumer spending that is feeling it,\u201d Tolivar told us.
Beyond that demographic-specific challenge, Cava and Chipotle had slightly different messages about lower-income consumers.
\u201cEarlier this year, as consumer sentiment declined sharply, we saw a broad-based pullback in frequency across all income cohorts,\u201d Boatwright noted. \u201cSince then, the gap has widened, with low to middle-income guests further reducing frequency.\u201d<\/p>\n

Revenue from guests with household incomes below $100,000 \u201crepresents about 40% of [Chipotle\u2019s] total sales,\u201d he added, and the company\u2019s internal data suggests that the group \u201cis dining out less often due to concerns about economy and inflation.\u201d
Cava, however, had a bright spot to share with respect to low-income consumers, which Tolivar credited to the company\u2019s pricing actions.
\u201cAt Cava, when we look at our restaurants based on median household income in their market area, we did see higher same restaurant sales in our lower income markets,\u201d she said. \u201cAnd what that tells us is that as we\u2019ve been thoughtful on pricing over time, we\u2019ve created a product that is more accessible to consumers in lower income brackets.\u201d
Since 2019, Tolivar explained that Cava has \u201cunderpriced CPI by 10%, and when you compare our price increases from that time to the end of September of this year, we actually raised prices half of what the rest of the industry did, and that creates a compelling value proposition.\u201d
In trying times, value might just be the name of the game.<\/p>\n

This report was originally published by CFO Brew.<\/p>\n